If you’re a fan of that beloved 1939 MGM film, or of Warner Bros., the studio that now controls it, or of Turner Classic Movies, the cable network that frequently airs it, it may be time to start paying attention to business news. Because a corporate twister is on the horizon – one that could completely change the media landscape, particularly for classic film fans.
Time Warner, the parent of Warner Bros. and Turner Broadcasting, announced today that they had rejected an unsolicited $80 billion takeover offer from Rupert Murdoch’s 21st Century Fox. In a video message posted to YouTube, CEO Jeff Bewkes revealed that the company’s board had rejected Fox’s cash-and-stock bid, issued in June, which valued Time Warner at roughly $85 per share.
“The board, after consulting with our financial and legal advisors, determined that it is not in the best interest of Time Warner or our shareholders to accept the proposal, or to pursue any discussions with Fox,” Bewkes said. “The board concluded that continuing to execute our strategic plan and our business plans will create significantly more value for the company and our share holders, and that that’s superior to any proposal that Fox is in a position to offer.” (The bolding is mine, not his.)
End of story, right? Not necessarily, according to CNBC analyst Jim Cramer.
“The company is going to get sold, I really believe that,” Cramer said on CNBC today. “I think it’s very hard to fight a guy who has unlimited firepower, and Murdoch has unlimited firepower.”
Ken Griffin, founder and CEO of the Citadel hedge fund, appears to agree with Cramer.
“We’ll get to a yes,” Griffin said this morning in the keynote address at the Delivering Alpha conference in New York City.
Citadel owns stock in both companies, as do 70 percent of Time Warner’s shareholders. Time Warner (TWX) stock rose on the news of the potential merger, closing at $83, up more than 12 percent.
For some, a merger of Fox and the now-Time-less Time Warner is a dream more than 80 years in the making, ever since Warner’s head of production Darryl F. Zanuck left the Burbank-based studio in 1933 to form the pre-cursor of 20th Century Fox. For others, the concept of the controversial Australian mogul owning CASABLANCA, GONE WITH THE WIND, and a majority of the films made during Hollywood’s Classic Era is akin to the Wicked Witch winning.
For TCM, the corporate revolving door is nothing new. In fact, the channel was created by an acquisition: Ted Turner’s $1.5 billion purchase of MGM/UA in 1986, a controversial deal that transferred ownership of more than 2,000 MGM, RKO, and pre-1950 Warner Bros. films to the Atlanta-based cable TV mogul. Initially these films served as programming for Superstation WTBS, and then later for TNT (launched in 1988) and TCM, which debuted in 1994. (Turner later sold MGM, UA, and the historic backlot, but kept the film library.) In 1996, Turner cashed out and sold the company that bore his name to Time Warner, which itself had been formed by the merger of Time Inc. and Warner Communications in 1989. AOL (remember them?) then bought Time Warner for $164 billion in 2000 (at the time the largest merger in corporate history), a disastrous deal that was finally un-spun nine years later. And earlier this year, Time Inc. was spun off, leaving Time Warner in the awkward position of being half-named after a company it no longer owned. (Time Warner Cable was also spun off in 2009, and now has nothing to do with Time Warner, despite its name, which will likely disappear if/when it merges with Comcast.)
Got all that?
Even if you don’t, here’s the point: TCM has survived through two decades of mergers and acquisitions, with a vast library of films it once owned and then no longer owned (it now licenses those movies from Warner Bros. Entertainment). And it has remained, at least on-air, remarkably unchanged.
But here’s where a potential Fox/Time Warner team-up may be different.
“The company estimated that a combination would create $1 billion in cost savings and possibly more,” Andrew Ross Sorkin wrote in the New York Times today. And Fox, the owner of the Fox News Channel, has indicated that they would sell CNN, the 24-hour news network Ted Turner founded in 1980, to smooth potential regulatory concerns.
Throughout its 18 years as a unit of Time Warner, Turner Broadcasting has largely remained autonomous. But if a merged entity begins to shed key Turner assets, that autonomy may change. Would TCM survive? And, if so, would the network’s management remain empowered to program a niche cable channel as they do today, with no regard for ratings or advertising revenue? Or will TCM suffer the same fate as the late, lamented Fox Movie Channel, which began life as a commercial-free classic film channel and recently rebranded as FXM, with (mostly) contemporary films – edited “for content” – and plenty of commercials.
And what about MOVIES!, the digital broadcast network programmed with classic films that Fox launched a year ago? Available over-the-air in 49 percent of the US, often as a sub-channel on Fox owned-and-operated local stations, MOVIES! airs Fox releases from the 1940s through the ‘80s, many of which formerly appeared on the Fox Movie Channel. A combined Fox/Time Warner could eventually augment MOVIES! with the library Turner bought nearly 30 years ago, and which Warner Bros. now controls. And, considering that MOVIES! and TCM target the same viewer base, there’s even the possibility that programming and branding could be shared between the two channels. Might we see Robert Osborne and Ben Mankiewicz hosting on MOVIES? I’d do that in a heartbeat, if I were in charge. (I’m available, by the way, and thoroughly qualified.)
And what about Warner Bros.? A merger of two of the Big Six movie studios would give the new entity roughly 30 percent of the theatrical market share in the United States and Canada (based on 2013 numbers). But where the merger may have a larger impact, at least for classic film fans, is in home video and digital distribution.
In 2009, the studio launched the Warner Archive Collection, a manufacture-on-demand DVD service that has gone on to release thousands of rare movies and hundreds of hours of TV shows, many restored or remastered for the first time in decades (or ever). Much of that content is also available on a subscription video-on-demand streaming platform, Warner Archive Instant, launched last year. Considering that WAC is a small, efficiently run organization generating revenue out of previously-under-exploited assets, it’s probable they would continue. But, even better, a post-merger WAC might gain access to the deeper cuts in the extensive Fox library, which heretofore has largely been (mis)handled by Fox Cinema Archives, an MOD service notorious for releasing sub-par transfers that are often in the incorrect aspect ratio.
Considering the recent success WAC has had with licensing and releasing titles from the Paramount library, access to 80 years of Fox assets would be a boon – and classic film fans would rejoice. And Warner Home Video, with their industry leading market share, would also likely take the lead in exploiting the better-known Fox classics on Blu-ray and across new media distribution platforms, like V.O.D.
There are a lot of questions regarding a potential merger of Fox and Time Warner, but one thing is always certain: content is king. That was true when Ted Turner paid $1 billion for 2,000 films in 1986, and it’s true today. And at first glance, it appears to me that this merger would only likely increase access to, and availability of, classic films and TV shows. Does it matter who owns them? Probably not. What matters most is that we can continue to see them with friends and family.
Because, regardless of who you send the rent check to, “There’s no place like home.”